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Import schedule provides wheat price risk: Grain Market Daily

Wednesday, 20 May 2020

Market Commentary

New crop (Nov-20) UK feed wheat futures continued to find strength yesterday, in line with global markets. The Nov-20 contract closed up £0.20/t, at £165.70/t, recording its fourth consecutive day of gains.

Dry conditions in Europe remain a significant watch point for new crop prices, with the two week outlook continue to highlight a lack of rainfall.

On Monday, the EU released its latest crop condition (MARS) report. The report highlights the challenges faced by the ongoing dryness, reducing yield estimates for new crop winter cereals on its previous estimate.

Also on Monday, the USDA released its latest crop condition report. Maize and soyabean planting continued to progress rapidly. Spring wheat planting continues behind last year’s pace with cold weather affecting the Northern states.

James Webster

Import schedule provides wheat price risk

Yesterday, the UK government released its import tariff schedule, which is due to come into force once the UK leaves the European Union on 31 December 2020. For arable, the tariff schedule largely reflects the adoption of EU tariff rates, transformed by currency, whilst for maize the tariff rate has been liberalised to zero.

The maintaining of tariffs on wheat and barley reflects the UK historic position as a net exporter in both products. However, this poses a potential risk for the domestic market next season, if there is no trade agreement between the UK and EU.

Next season the UK could be set for a sub 10Mt wheat crop. This, combined with uncertain wheat quality, could mean the UK has a need to import an increased volume of low and medium grade wheat.

The UK is set to adopt a zero rate tariff on high quality wheat; defined as over 13.5% protein, 78kg/hl specific weight and 230s Hagberg Falling Number, but below that, a tariff of £79.00/t is proposed. This could cause supply headaches beyond the end of December, supporting domestic milling premiums.

In reality, the support will be limited; we are likely to see a considerable front-loading of wheat imports through the first half of the season, to compensate for the potential loss of imports in the second half of the year.

The impact of tariffs on wheat is likely to be a short time risk with a somewhat freak year anticipated for wheat production. In a “normal” year, if there is such a thing anymore, UK wheat imports are likely to be minimal and from an importing perspective, are likely to be focused on the higher quality group.

From a feed perspective, in low cost years, the imposition of a tariff would likely drive compounders away from wheat where possible and result in increased inclusions of imported maize.

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3 June 2020

As we move towards harvest 2020, the value of imported grains and oilseeds will play a key role in setting the price of domestic supplies, the value of imported maize will prove pivotal to setting values in feed markets.

2 June 2020

Planting figures for US maize and soyabean crops were slightly below market pre-release estimates, according to Monday’s US crop progress report. Progress has slowed from the rapid pace seen at the start of the season, but remains above the five-year average (2015-19).

29 May 2020

Higher UK wheat supplies due to a large production year and relatively stable demand, combined with our export campaign slowing considerably post October have resulted in a large increase in closing stocks.

28 May 2020

During our barley week last week, we highlighted the increase in trade tensions between China and Australia, with the former potentially imposing a $74/t tariff on imports of Australian barley. This offers a high degree of price risk for domestic barley, particularly given the significant export volumes expected from the UK next year.

27 May 2020

News of countries beginning to ease lockdown measures has enabled vegetable oil prices to show some signs of recovery. UK rapeseed prices have benefitted from both this rise in Paris futures and a weakening GBP/EUR exchange rate.

21 May 2020

The closure of the food service industry for almost two months now has reduced demand for meat and grain products. The impact of coronavirus on meat and dairy production will likely translate to a fall in demand for feed grains.

20 May 2020

Yesterday, the UK government released its import tariff schedule, which is due to come into force once the UK leaves the European Union on 31 December 2020. For arable, the tariff schedule largely reflects the adoption of EU tariff rates, transformed by currency, whilst for maize the tariff rate has been liberalised to zero.

13 May 2020

Yesterday the USDA released their first new-crop supply and demand estimates for global grains. Whilst the market isn’t initially shocked by these, the context does frame a longer-term bearish view to grain markets with growing global stocks and increases in production.

13 May 2020

In these current uncertain times, the concerns around how we will leave the EU almost seem like an earlier lifetime. But they are still very real. The UK is scheduled to exit the Union on 31 December 2020 and unless a trade deal is struck, UK barley exports into the EU may be subject to a hefty tariff.

6 May 2020

While this time of year would normally be dominated by a weather market, the direction of commodity markets continues to be heavily influenced by politics, the pandemic and global economies to a larger extent.

30 April 2020

In unprecedented circumstances, it becomes increasingly important to draw out the implication of coronavirus for the UK market. One of the biggest talking points from a domestic consumer perspective has been the lack of flour on supermarket shelves. It is all too easy to assume that demand for wheat from the human and industrial (H&I) sectors is on the rise.